FCC prohibits certain agreements between building owners and communications companies | Brownstein Hyatt Farber Schreck
A recent FCC order prohibits certain types of contractual arrangements between building owners and telecommunications or cable companies. The ordinance: (1) prohibits exclusive revenue-sharing agreements and progressive revenue-sharing agreements; (2) requires disclosure of proprietary marketing arrangements; and (3) prohibits “sale and leaseback” within cabling arrangements. The revenue sharing and marketing disclosure rules apply to telecommunications carriers in multi-tenant residential buildings like apartments and condominiums and commercial buildings like office buildings or shopping malls (known as MTEs). For cable operators, the new rules only apply to residential MTEs. Revenue sharing and disclosure rules apply to new and existing contracts. The order also prohibits cable companies from transferring their ownership of the inside wire to MTE’s residential owners and then leasing the cable to the building owner.
The FCC has long prohibited telcos and cable companies from entering into agreements with building owners that prevent any other provider from entering the building. Certain other types of exclusive agreements, such as exclusive revenue sharing or marketing agreements, have so far been permitted. Some providers have argued that these other types of arrangements effectively prevent tenants from choosing their phone, cable or broadband provider. In response to these concerns, the FCC initiated a new procedure in 2017. Last summer, President Biden issued an executive order encouraging the FCC to review these practices which was quickly followed by an FCC notice to put update information on the state of competition in multi-tenant buildings. , resulting in the recent command.
Revenue sharing. To help building owners cover the costs of deploying networks in their buildings, providers often agree to make payments to owners from the revenue they receive from providing communications services to tenants. The ordinance prohibits two specific forms of revenue-sharing agreements. Vendors will be excluded from exclusive revenue sharing agreements that prevent the building owner from entering into revenue sharing agreements with other vendors. Another type of arrangement allows the building owner to receive a higher percentage of revenue because the supplier serves a greater number of tenants. The ordinance prohibits such progressive revenue-sharing agreements, whether exclusive or not. The order does not prohibit other forms of revenue-sharing agreements or other forms of payment to building owners and does not cap the amount of revenue a provider can pay.
The prohibition of these types of revenue-sharing agreements applies to both new contracts and existing agreements. The ban on new contracts takes effect 30 days after the publication of the decree in Federal Register and the ban on existing arrangements will take effect 180 days after posting.
Disclosure of exclusive marketing arrangements. The FCC order does not prohibit exclusive market agreements between building owners and suppliers, but it does require their disclosure. These marketing agreements give a supplier the exclusive right to market the building. The disclosure must: (1) appear in all of Supplier’s written, printed, or electronic marketing materials to tenants or potential tenants of the applicable MTE; (2) identify the existence of the exclusive marketing arrangement and include a plain language description of the arrangement and what it means; and (3) be written in a clear, visible and legible manner. The disclosure shall inform tenants that the provider has the right to exclusively market its communication services to tenants of the building, that this right does not mean that the provider is the only entity that may provide such services to tenants of the building. building, and that service from an alternate provider may be available.
The disclosure requirement applies to new and existing exclusive marketing agreements. For new agreements, the disclosure requirement will take effect after the Office of Management and Budget (OMB) approves the requirement. Disclosure of existing proprietary marketing arrangements will be effective no later than OMB approval or 180 days after the FCC order is issued in the Federal Register.
Sale and Leaseback of Cable Inside Wiring. Existing FCC rules have long required cable companies to make wiring they have installed and own inside apartments available to other providers if the tenant terminates cable service. The FCC has expressed concern that cable companies could avoid this obligation by selling their interest in the cable to the owner of the building and then re-letting it on an exclusive basis. The order prohibits sale-and-leaseback agreements, which it defines as a cable company’s assignment of its inside wire to an MTE residential owner and then re-letting it on an exclusive basis. Although called a “sale”, the assignment does not necessarily require monetary consideration.
The ban on sale-leaseback agreements applies to those agreements entered into since the FCC initiated the pending case in June 2017.
This order may not be the FCC’s final word on building access issues. The FCC intends to monitor the developments and may take other unspecified actions in the future. There are certain actions that this order does not take could be taken at a later date. For example, the ordinance does not apply to broadband providers only and does not require the sharing of in-service interior cables. Additionally, while the FCC has no jurisdiction to compel owners to allow vendors access to their buildings, some states and localities may have the power and be more willing to impose open access obligations on owners of MTEs. in light of this order.